UK earnings data surprises to the upside today as average wages increased 3.2% vs the analyst expectations of a 3.1% increase. The claimant count for December also beat forecasts to print at 14.9K and the 3-month employment change hit a whopping 208K.

After the recent spate of bad data in the UK the market has started to price in a high probability (around 60%) that the Bank of England will cut rates next week. This was backed by comments from BoE’s Vlieghe in his interview with the press a just over a week or so ago. Vlieghe also said he would be watching the data so this may have thrown a spanner in the works for GBP bears.

Since the start of the year cable (GBP/USD) has fallen 1.80%. This move came after all the post-election bullishness that saw the pair trade as high as 1.3515 in December. The key support on the chart is now 1.2960 as if it breaks the price would make a lower high lower low wave formation. On the upside, the bulls still need to target a hold above 1.31.

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GBP/USD 4-Hour Chart

The chart is showing that other than a minor break the channel has been respected. Now after this new information it could provide the opportunity for the market to short at higher levels. This means you should keep an eye on the resistance zones on the chart. 1.30 is an obvious support zone but below that, the wave low of 1.2960 remains important.

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